Title loans can be harsh. They are essentially the ultimate in collateral-based loans, that collateral is a car. Title loans tend to have high-interest rates compared to their low amount and brief repayment periods. Those who fail to make the payment lose their collateral, which is, of course, the car that they own free and clear. Besides car loss, failure to pay title loans can negatively affect one’s credit score. It can also make acquiring a car loan extremely difficult. Someone who just had their car repossessed due to loan payment failure doesn’t inspire confidence about making reliable payments.
Title Loan Caution
Those seeking title loans are usually in a precarious financial position to start, but losing a car will make that worse. To prevent a significant mark on a credit score and loss of a vehicle, those in a position to do so should consider carefully if title loans are the right solution to their financial shortfalls. Title loans are usually pretty easy to get for those who own their car, but they have conditions that need to be understood before taking the loan.
Short Repay Period
Title loans have a short repayment plan, usually a couple of months. They also have a high-interest rate in comparison to their amount. Most title loans are only a few thousand dollars. Title loans are viable as a stopgap during a financial emergency, but the costs can prove heavy without careful planning. Those seeking a title loan are advised to have a payment plan in mind before they obtain title loans.
Remember that only car owners can obtain a title loan. Those who lease or are still making car payments cannot get a car title loan. A car owner seeking a title loan has even more to lose. If the car is repossessed for non-payment of the loan, the car owner is losing their car for less than it is worth. If you’re going to lose your car, it would be better to sell it outright. With a black mark on your credit report for non-payment, it will be hard to get a car loan in the future.
Quick Cash, But Use Caution
Title loans can provide much needed breathing space in a financial pinch, but only for those capable of making sure they pay the loan back in time. Those who don’t will likely lose their car for failure to pay the loan, which can affect one’s credit score and life for years to come. Those who seek title loans must make sure they’re prepared to pay it back with money before they end up paying it back with their only means of transport.